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The State of Natural Gas SupplyAPPA Meeting
March 15,2011
Phoenix, AZ
1
Dave Risser, MarathonMark Quartermain, Shell
A Decade Makes A Difference
Then Shale known but uneconomic
Storage rates regulated
Four LNG ports, not all active
Conventional gas dominates
63-year supply
Incomplete price transparency
Limited means to respond to sudden demand changes
Now Burgeoning production
Market-based storage rates
Eight-plus active LNG ports
Shale gas growing fast
100-year supply
Most transparent fuel market in world
Highly market-responsive supply
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Decade of Growing Natural Gas Infrastructure
3
44
555
How Shale Produces Natural Gas
6SouSource: Energy Tomorrow 66
Technology’s role: Why the revolution
Traps vs. shales
Migratinghydrocarbons
Shale
FrackPorous and permeablereservoir layer
Hydrocarbon Trap
Impermeablesealing layer
organic richsource layer
Fracture stimulation 5,000’ – 15,000’ below the surface
#
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Source: CME Group, a CME/Chicago Board of Trade Company
Ebb and Flow of Commodity PricesNatural Gas 2002-2010
10
Source: CME Group, a CME/Chicago Board of Trade Company
Ebb and Flow of Commodity PricesNatural Gas compared to Crude Oil & Coal
2002-2010
11
Ebb and Flow of Commodity PricesNatural Gas compared to other Major Commodities
2002-2010
Source: CME Group, a CME/Chicago Board of Trade Company
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Natural Gas Myths
MYTH #1 –”There’s not enough natural gas to meet demand from manufacturers and electrics”
– U.S. supply up 40 percent since 2006 due to shale – 100-year supply with potential to grow
MYTH #2 – “Offshore drilling ban will hurt natural gas customers”– Most GOM gas production located in shallow water and excluded from ban
MYTH # 3 – “Heavy-handed regulation of shale could stop its production”
– States are heavily invested in shale production – 50,000 jobs created in 2009 in Pennsylvania alone
MYTH #4 – “Natural gas is vulnerable to Middle East policies”– Between 1 and 3 percent of U.S. demand is met by LNG imports– 75 percent of those imports are from Trinidad & Tobago, remainder from
Norway, Algeria, Egypt, Nigeria and Qatar.
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NYT/Radium Issue
New York Times alleges that radium from produced shale water ends up in Pennsylvania drinking water
Producers take all such allegations seriously– PA authorities subsequently published test
results showing water meets fed/state radium standards
– Producer goal: Recycle 100% produced water—up to 65% now
– Support further state testing
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Final Thoughts
Entire gas industry significantly expanded since 2000
Industry takes “Fracking” issue seriously, but believes it can be managed
Competitive market has dampened price volatility
“Dash to Gas” issue overstated
U.S. enjoys most robust, transparent, and reliable natural gas industry in world
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Thank You
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Backup Slides
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Natural Gas Among Cleanest Electric Generation Alternatives
Most emissions Middle emissions Least emissions
Source: R.W. Beck
Tons /year/thousand households
Biomass (Wood) Coal Natural Gas
Nuclear & Renewables
CO 51 5.8 1.5 0.0
CO2) 0.0 9,362 3,558 0.0
NOx 28 3.4 0.3 0.0
Particulate Matter 2.7 0.9 0.0 0.0
VOCs 5.6 0.2 0.0 0.0
SO2 2.8 5.0 0.2 0.0
Mercury 0.0 0.0001 trace 0.0